Young entrepreneurs revealed

More young people are starting-up than ever before, but how likely are they to succeed?

Though it’s probably stretching the point to claim that business is the new rock and roll, the fact remains that levels of entrepreneurial behaviour among those barely out of short trousers are reaching new heights.

Whether it’s the freedom of being their own boss, an overwhelming passion for a product, or simply the financial potential that going it alone could bring, starting in business for yourself is most definitely in vogue among the young.

But are these upstarts the growing businesses of tomorrow or are they heading straight for the scrapheap? After 21 years of advising young entrepreneurs on how to build their businesses, Shell LiveWIRE has looked into the changing face of youth enterprise over the years. What emerges is an interesting story. While a few have gone on to huge success and others have disappeared into obscurity, they all faced the same pitfalls and pleasures along the way.

THE JOYS OF YOUTH
FACT: Most popular reason given by young entrepreneurs for starting a business is ‘to be their own boss’; followed by ‘putting their ideas into action’

Whatever the motivation, the buzz and excitement of those early days is often looked back on by the old-timers with a misty-eyed nostalgia. Before reality hits home, the sky’s the limit and it’s enough to get most businesses off the ground.

“It was always a question of when I would go it alone rather than if,” says Paul Ephremsen founder and managing director of promotion company ID Brand Experience. He set up the firm along with friend Paul Soanes at the age of just 26. As someone who always considered himself as having entrepreneurial flair, Ephremsen simply walked into a London estate agents and asked if they had any offices for rent at cut price rates. They did and for the first year ID ran its venture for £50 a week from what was essentially a corridor. Now the company has clients such as Nestlé and Proctor & Gamble on its books.

This kind of audacity appears to be a common trait among young entrepreneurs. According to Dr Shailendra Vyakarnam, director of teaching and training at the Centre for Entrepreneurial Learning in Cambridge, the change in attitude lies with the Iron Lady.

“The biggest change came when Thatcher was elected in 1979, ushering in the free market economy and dismantling large bureaucratic organisations,” says Vyakarnam. “All these businessmen in their forties had to find something else to do. It’s today’s entrepreneurs that benefit because they have role models to turn to for advice, whereas 20 years ago all you had were the chairmen of big conglomerates who knew bugger all about starting up from scratch.”

Entrepreneurial experts agree, age isn’t a barrier to success. Time was you would work your way up the ladder, finding your way blocked by your boss who stubbornly refused to hand over the reigns, before deciding you could do it better, and off you went with your list of contacts. Today’s budding entrepreneurs forgo all that, and head straight for their high street bank to pick up some free business planning and cash flow software, before whacking their initial start-up costs on the credit card.

“To start with it was a bit of a disaster, there was no plan or funding,” admits Ephremsen. “But now we’ve proved we were right, instead of looking down at us, people recognise we had the balls to do it.”

GROWING PAINS
FACT: The biggest challenge growing businesses face is finding the right personnel

When they do make their way out into the world, entrepreneurs face a bewildering array of options. But whichever route they choose to take, there will be troubled times and difficult decisions ahead.

Even those on the fast track to success can find the road paved with problems. Bashir Timol, 28, is the director of 1st Ethical, the UK’s first firm of independent financial advisers catering exclusively for the Muslim community. The company has outpaced Timol’s and his chairman’s, Sufyan Ismail’s, expectations, but bringing on board advisers and other personnel who share their ideals and passion has meant the process has not always been straightforward.

“Our long term plan was to create a network of advisers and, along with operational issues, we’ve had to cope with bringing others on board and getting them through the right exams,” he says. “We’re focused on people because it’s a knowledge industry, but it was very difficult initially to persuade others to join us. Now we have been transformed into a company which is recognised as achieving success, things have become easier.”

Stewart Graham, founder of Gael Force Marine Ltd, came across a different set of growth problems. Initially started up in 1984 to make lobster pots the company has since been transformed into an international business, but in order to get there he had to move outside his own market into other sectors. “In hindsight I should have taken more time to choose where I was starting because in the whole of the UK, making lobster creels is only a £1m market, so that’s been the biggest barrier for us,” he says. “We’ve had to work hard to build business in new markets and have only been able to grow by acquiring new products and then new customers.”

FACING THE FUTURE
FACT: Nearly 80% of new businesses will end up employing less than 10 people

After the halcyon early days and the difficult second stage, the next phase for entrepreneurs is something of a midlife crisis. Even those who’ve been instilled with an entrepreneurial spirit from an early age can make the decision that enough is enough.

Anna Ashmole started up Unicorn Foods as a small company producing and distributing fresh vegetable pate to sandwich shops and delicatessens. However, as the food industry changed, in order to expand Ashmole would have been forced to deal directly with supermarkets. This was something she was opposed to, so she decided the time was right to sell up. She now works for the Soil Association.

“I found it frustrating that there was this kind of pressure on me to build my business up into something more, but there was no intention on my part to do that. I had fairly limited ambitions, but I achieved them,” she says.

And for those who do want to take their business into the big leagues it’s not easy. Geraint Howells, partner at Kingston Smith, believes the root of the problem lies in a gap in the equity market.

“The difficulties of finding finance outside of family and friends haven’t really changed in the past 20 years,” he says. “When you’re up and running, but want to go on to the next stage, it’s very difficult. Possibly because people nowadays have less of an asset base behind them, so banks are more reluctant to hand over the cash.”

Les Clifford, UK entrepreneurial growth markets leader at Ernst & Young agrees: “It’s relatively easy for a startup to get £100,000 for seed funding or for an established business to get £30m, but it’s the second stage that tends to be much harder.”

Joe Govier is an entrepreneur who’s had first-hand experience of this difficult phase. At 21 he started Details Plastics Ltd, an injection moulding business supplying plastic medical products to pharmaceutical companies. It expanded rapidly, attracting interest from an American company, which provided him with the capital to expand. But by 2002 Govier’s involvement in the firm had been transformed and he felt he had little option but to sell up.

“As a growing company you’re forced into the situation, because on your own you just don’t have the capacity to fuel growth. When the banks get involved you’ve got to deliver. They don’t even want to consider consolidation and there’s pressure to grow and bring in external funding and then you’ve lost control,” he says.

The experience was a tough one for Govier, made all the more difficult because of the clause in his contract which meant he could not set up again in the same industry. After taking a year out he started up Connect 2 Clean Rooms, which provides sterile rooms for hospitals, manufacturers and other clients. He says he’s learnt his lesson: “Now I don’t have any bank lending, I’ve started up as a sole trader and then become a limited company. When the time arrives to bring in external finance I’ll be in a stronger position.”

LETTING GO
FACT: 86% of entrepreneurs who start their own business stay with their original company

Letting go can be one of the hardest things to do. For serial entrepreneurs it’s easier. They only build businesses in order to sell them and move on to the next project. For ‘lifestyle’ entrepreneurs the process is made easier if the right money is put on the table. But most people aren’t serial entrepreneurs so it’s a different story.

“There’s a real dilemma facing many entrepreneurs,” says Geraint Howells. “They get to 60 or 65 having worked in what’s been their business for a long time and there’s not a natural progression. They need a pension to live off. Do they sell? It’s a difficult time.”

“If they haven’t thought of a sound exit strategy they are endangering the business. External funders tend to back a person, so if they walk out of the door there’s going to be concern,” says Clifford.

There will be some who have considered their options. Joe Govier wants to take his entrepreneurial skills away from his business with thoughts of running a chalet in the Alps, while Ephremsen is looking to take his hobby of greyhound racing more seriously.

But for others, like Stewart Graham, the issue of letting go is less clear cut. “At the moment we are at a crossroads. We’ve realised our vision and now it’s time for a new plan which could include an exit, a sale or handover to the new generation, but I’m not yet clear in my own mind. I have to decide for myself what I want to do next.”

HOOKED FOR LIFE
FACT: 44% of entrepreneurs would not become an employee for any salary at all

Looking back at the obstacles faced by entrepreneurs you might be wondering why anyone bothers. From the difficulties of expan- sion, then the pressure of outside investors and finally the trials and tribulations of saying goodbye. This, added on top of the stress, strain and hours away from loved ones, makes it seem one hell of a career choice.

But ask any entrepreneur you come across about their experiences, no matter how big or how small their venture, and on the whole they won’t have any regrets about the life they have chosen. For example, even though Anna Ashmole left her business at a relatively early stage, she is still extremely proud of what she achieved and believes it has had a huge impact on what she has done since.

“My entrepreneurial bent has definitely had an influence on what I’ve done and though there have been times when I’ve thought of going back, I’ve never given in. The business I set up is still running, it’s provided jobs for a few people where there weren’t any before and provided a healthy eating option so that’s still an achievement,” says Ashmole.

Bashir Timol takes a similar view: “1st Ethical has shown me the possibilities of what I can achieve, and that the sky is the limit as long as you have a logical and viable plan and energy and vigour, and that’s not just in business.”

In hindsight, entrepreneurs recognise that going it alone was simply something they were meant to do, regardless of age or background, and it’s had a significant impact on their lives, which on the whole has been for the better.

Dr Vyakarnam thinks that the existence of serial entrepreneurs is evidence enough and Stewart Graham puts it this way. “You have to be determined, aggressive and competitive to succeed. You win the game on one playing field and then you become uninterested, so you go and find another, bigger field to play on. “Ask yourself, could you imagine having done anything else?

 

THE LIFE OF AN ENTREPRENEUR IN FACTS AND FIGURES

(Data based on survey of over 200 entrepreneurs who contacted Shell LiveWIRE between 1986 and 2003)

The most popular reason given for starting up is to ?be your own boss?. This is followed by ?putting ideas into action?. The least popular answer was to make money and being unhappy in a previous job.

48% run limited companies

40% are sole traders and

12% are partnerships

28% had a first year turnover of under ?20,000, but

11% exceeded ?100,000

43% have stuck with their original business plan

55% sought help to develop their business

37% undertook training

The biggest challenge that entrepreneurs faced was employing the right personnel. This was followed by finance and being taken seriously. The best aspect of running a business was the job satisfaction of being your own boss

86% are still running their original business

6% have gone back to employment

90% had less time for themselves and others since starting a business

57% are financially better off than they were previously

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